Members Only | 21/07/21

The very clear message from the Financial Conduct Authority (FCA) in their Guidance for firms on the fair treatment of Vulnerable Customers (FG21/1) is that organisations must have good clear strategies for identifying and dealing with vulnerable customers.

Customers experiencing financial vulnerability has not just been caused by the pandemic, this isn’t new, however what is new is the unprecedented circumstances we have all had to endure throughout the last year, and it’s not over yet. The economic impact of the pandemic (still not fully known) has brought vulnerability to the forefront of the FCA’s agenda, hence the expedited publication of the new guidance.

For many years now organisations have erred on the side of caution and ‘ring fenced’ customers showing signs of vulnerability. They are moved out of collections strategies and ‘safeguarded’ with protection in mind, but of course these customers are unlikely to follow this path unless they engage with the business to notify a change in circumstances. Unfortunately, not all customers will do that, and our experience shows that a common characteristic of vulnerable customers is that their circumstances can often limit their ability to make decisions and choices which represent their own best interests. This of course inevitably often results in customers becoming caught in a ‘safeguard and protect’ limbo journey, which is a poor customer outcome overall.

•  no one is regularly making contact with them to check how they’re doing and if they need any further help, or indeed to see if their circumstances have improved or worsened

•  they’re not receiving a fair treatment like their ‘non-vulnerable’ peers’

•  it’s likely the customer will have outstanding debt and a negative credit rating for longer than necessary

•  the ability to get a reasonable opportunity to fix their credit rating is impacted

•  the customer is, to some extent, in the dark with no knowledge or visibility of their account status.

None of these points are fair outcomes and none of them compare to the experiences available to customers who have never expressed vulnerability.

With over 24 million consumers showing signs of vulnerability and 30% of those being over-indebted with signs of low financial resilience, it’s important that all sectors and organisations take notice of how vulnerable customers are being identified and managed.

From inception and throughout the life cycle, the customer’s journey is paramount. Whilst the initial identification of the customer’s circumstances is key, ultimately having the ability to do the right thing and ensure the long-term journey of the customer is both fair and in their best interests, should be at the forefront of organisational outcomes.

The FCA: “want all consumers to experience outcomes as good as those for other consumers and receive consistently fair treatment across the firms and sectors they regulate.”

This doesn’t mean doing the same thing for all customers, vulnerable or otherwise, as we know one size doesn’t fit all when it comes to customer treatment. We all have an obligation in our businesses to assess and understand the impact of vulnerability and potential harm customers may be exposed to.

We’re not always starting from a positive viewpoint either, adults with one or more characteristic of vulnerability are much more likely to disagree with the statement that ‘financial firms are honest and transparent’, than adults with no characteristics of vulnerability (38% vs. 27%, respectively) Organisations have more work to do to ensure strategies are designed with their specific customer demographic in mind and that they deliver on what they say they will.

This most definitely means that ‘safeguard and protect’ must not be to the detriment of the customer’s long-term journey, but always with the right outcome in mind.

Denise Crossley